title: "Episode 20: Android"
author: "Acquired"
source_type: podcast
content_hash: b0e5d6c0684660e4debb5fc7140abea5d1151793179f47d131ddd2054b859b6f
extraction_method: generic_website
Transcript:
(disclaimer: may contain unintentionally confusing, inaccurate and/or amusing transcription errors)
Ben: Welcome back to Episode 20 of Acquired, the podcast about technology acquisitions. I’m Ben Gilbert.
David: I’m David Rosenthal.
Ben: And we are your hosts. Today’s episode is one that’s been coming for a long, long time. It's a cornerstone of all of computing today – Google’s 2005 acquisition of Android.
David: I’m speechless.
Ben: Yeah, it's interesting. I mean, 2005, when you think about the numbers it doesn’t feel that long ago, but when you think about the first time you saw an Android phone and heard about what Google is working on, it seems like the iPhone hadn’t come out yet, right?
David: Yeah. This was before. iPhone was just a glimmer in Steve Job’s eye.
Ben: Yeah, all right. So to all of our new listeners, welcome. We were featured on New and Noteworthy in iTunes over the past, looks like a week or two and about doubled our subscriber base. So, thanks so much for everyone trying us out and giving us a shot. I think what I want to do is go over the format of the show since a lot of you are new and talk about what we’ll cover today and kind of reviewing and grading Google’s Android acquisition.
So the first thing is something sort of newish that we’re trying called Community Showcase. We felt it was important since we have so many listeners who are working on projects and building things, a lot of entrepreneurs, and we like to on each episode talk about something that one of those people is working on. So we’ll do our Community Showcase, then we go into Acquisition History and Facts where David takes us through…
David: What actually happened.
Ben: Yeah.
David: What happened and when.
Ben: Then we get into the acquisition category where we decide if it's a people acquisition, technology, product, business line. We recently added asset to our categories or the ever-so-famous –
David: All-encompassing other.
Ben: Yes. Then we talk about what would have happened otherwise, what tech themes this illustrates for us. We then formally give the grade of our acquisition from the episode. Then we have some follow-ups and a section called The Carve Out. This is where David and I grab something from our lives that we’ve seen whether a book or a piece of software or anything in the media that we think is either related or completely unrelated to the topic at hand.
David: Just something fun that strikes our fancy. The other thing that we sometimes do now is Hot Takes. If something big in the M&A world or otherwise happened in the past week or two, we’ll do a quick discussion.
Ben: We will
David: So that’s the show.
Ben: Indeed. All right, so our community showcase this week. Listener Matt – I might butcher this – Morgante released a book called Patagonia on a Budget. It's on Product Hunt right now. If you search on Amazon for Patagonia on a Budget, you can find it. And it’s how to have your adventure in Patagonia on $3 a day. There’s a ton of cool photographs in there. I should go pick up a copy. It looks super cool.
Ben: Yeah. And if you want us to show off what you’re working on, drop a link in and we’ll check it out.
So, on to this week’s topic. David, you want to hit it with the acquisition history and facts?
David: As always, Ben. So, Android. As Ben mentioned, this one has been a while coming. We’ve had a lot of requests for this. We’ve been saving it and we felt it was time to finally dive in here. There is so much to unpack here, so we’ll get into it.
October 2003, Android is a startup company, just founded in Palo Alto by Andy Rubin, Rich Miner, Nick Sears and Chris White. Andy Rubin, the CEO, was basically born to start this company. So Andy’s career started at Carl Zeiss, the camera technology and camera lens manufacturing company. Then he moved to Apple. At Apple, he met a bunch of folks. This was during the John Scully era.
Ben: Wow, I did not know he was at Apple.
David: He was at Apple, yup. There for a couple of years. He and a bunch of other people spun off from Apple and started a company called General Magic, which not a lot of people remember, but this was a spin-off from Apple, actually went public itself. They never launched a product but what they were doing was they were building essentially a tablet, like a personal communicator, sort of a Palm competitor. A lot of that tech, I believe, ended up in the Newton at Apple.
Ben: They went public?
David: It was a public company, yup, and then it ended up going bankrupt.
Ben: Wow.
David: It was super ambitious at the time. I believe also some of the technology that they developed there became the standard for USB. A lot of really cool stuff happened there.
So, he went from Apple to General Magic and then, a bunch of General Magic alums went and started a company called WebTV, which you probably do remember. WebTV was part of… this was in the kind of mid to late ‘90s, a vision that a lot of people in technology had at the time that the internet was not going to happen on computers in a big way, it was going to happen on your TV.
Ben: That’s right.
David: So this was a set top box, with your cable box.
Ben: This is in the era that Microsoft was making the bet that they should do MSNBC like a technology-enabled television channel joint venture.
David: Yup, this is the AOL Time Warner days, like it's all new media, old media. Like, it’s the eyeball economy.
So WebTV ends up getting acquired by Microsoft. Andy and the team go up to Seattle, worked in Microsoft. I don't know if they actually ever came up to Seattle. But they built Microsoft TV which as we know is an abject failure.
But shortly thereafter, Andy leaves and he starts a new company called Danger. So Danger was founded in the late ‘90s, I believe, after Andy left Microsoft. They made a little device called the Sidekick. RIM already existed, so there were Blackberry’s out there but this was the first consumer-focused smartphone really.
Ben: Yeah, and it had like celebrities where it had a cool factor because they would show they’re Danger and, you know, photo shoots. This was a thing. You wanted to have one of these.
David: I remember the first time that I started hearing about the Sidekick and Danger was watching Entourage.
Ben: Oh, man.
David: It was like everybody on Entourage had a Sidekick. I think there’s actually an episode where there was a plot point that Turtle gets a Sidekick. Can’t remember exactly.
Ben: It’s so recognizable too, the way that it spun out. I mean, the industrial design was crazy, unique and super cool.
David: Yup. There was very little on the market. Like I said, there were smart phones, they existed, but this was like the Windows Mobile days, there was Blackberry.
Ben: It’s for business people.
David: It was for business people. Then the Sidekick comes out and it’s the first time like, “Oh, we can bring this technology to consumers as well.”
So, Andy was the CEO of Danger and then he ends up leaving relatively early on in the life of the company. Oh, by the way, supposedly, Larry Page and Sergey Brin were huge Sidekick users as well. So he ends up leaving and starting a new company that he calls Android. The vision for the Android is –
Ben: This is post acquisition?
David: No, no, this is pre-acquisition of Danger. Danger doesn’t end up getting acquired by Microsoft until 2008.
Ben: Oh, wow.
David: Much later. But in 2003, Andy leaves and starts Android. Whereas Danger was sort of a full stack company, they were making the hardware, they were making the software that went on the Sidekicks. They were dealing with carriers, everything.
Android is an operating system company. They want to take Linux and essentially make it into an operating system capable of running on mobile devices. We now know Android runs on so many devices today. The first target market that they’re going to go after is digital cameras.
Ben: That’s right, that’s right. I remember reading that and I think what they assessed is that it’s not a big enough market.
David: Yeah. Which is interesting because it was a huge market at the time. This was 2004. Everybody had the point-shoots and it will be interesting to know like what process they went through in deciding that that wasn’t big enough. But fortunately, they made the right call and it quickly pivot into focusing the device on mobile phones.
Ben: I wonder. The hindsight’s 20/20 but I don’t think it was apparent in 2003 that point-and-shoots would go away and become part of phones. Is there a world where you see that maybe the other way around that you’re like, we should build a really great camera because at some point cellular technology will become lightweight enough that we can put it in.
David: Into the camera.
David: It would certainly have been hard to imagine cameras on phones to the extent they even existed then getting good enough that you could actually take real pictures on it.
Ben: Right. I don’t think I had a camera phone until 2005 or 2006.
David: Yup, later than this time period.
Ben: They were just horrendous.
David: Oh, they were awful. Even the first iPhone in 2007 like the camera was part of it but it wasn’t like that was a big selling point and contrast that now with how huge the camera is on the iPhone.
Ben: I literally just pre-ordered a form factor that I don’t want because the camera is better. The Plus is too big for me. I had this weird realization that, “Wow, I use this thing more as a camera than a phone.”
David: Maybe Andy and team were more right than they thought at the time. Anyway, getting back on track. So, as far as we know, they never raised any venture capital at Android. But Steve Perlman who had been the CEO of WebTV and who had been at General Magic with Andy, and Andy had worked for him at both places, at one point there’s in the lower of pre-Google Android, apparently Andy was running low on cash and Steve shows up at the office at Android with an envelope with $10,000 in cash in it and he just gives it to Andy.
Ben: And he refuses to take a share in the company. Andy tries to give him shares for it and he says “No, no, this is just for you.”
David: No, he is just giving him the cash. What a good friend.
Ben: I know.
David: It’s awesome. Steve, will you be our friend? So that happens, they’re working away on this operating system and as we mentioned a minute ago, Larry and Sergey had been big Sidekick fans. They had actually met Andy back in the day when he was working on Danger.
July 2005 comes along and Google ends up just acquiring Android before they’ve shipped anything, they’re a long way away from shipping anything. Deal term is not announced. This was a small team, hadn’t raised any venture in Palo Alto. Rumored to be about $50 million. What’s interesting is that many years later, David Lawee who at one point had Google’s corporate development in 2010, he’s being interviewed and he calls this Google’s “best deal ever”.
So they've acquired this company, it’s Andy and team, they’re working on this operating system. Immediately, you know, Google had just gone public a year before, lots of rumors start circling about what Google is up to here. You know, are they working on the G phone, that’s kind of the like the G Drive that we talked about with Google Docs, the Writely acquisition. For years people are speculating “What is going on here? What is going on here?” and there’s no G phone. Andy and team are working away for years. So, pretty much nothing happens until 2007.
Then in January 2007, the world changes. Steve Jobs announces the iPhone.
Ben: The breakthrough internet communications device where nobody really understands what he’s talking about.
David: It’s a phone, it’s an iPod, it’s a breakthrough internet communications device. One of the best product launches and speeches and presentations of all time.
Ben: Yup.
David: So that happens in January 2007. Meanwhile, Andy and team within Google had been working on the operating system and they’d been working with hardware partners about what the phones that they would ultimately bring to market would look like and they’re working with HTC. They had a prototype and it looked a lot like the Palm Trio, if you remember that. It was not a touch screen. It had Blackberry-like keys on it. I’m not sure if it had a stylus, it may. So then they watched the iPhone announcement which at the time it was amazing like I lined up for the first iPhone, like I couldn’t wait to get it.
Ben: I lined up for the first iPhone and didn’t buy one. I was young and did not have any money and it was like I couldn’t pay for the data plan, but I wanted to be part of it.
David: That’s amazing. I was lucky I had just graduated from college when it came out that summer literally and this was the first cellphone I bought. Like I went off my parent’s plan, got my phone plan just so I could get an iPhone.